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Energized By Cable's Transition, NCTA CEO Sees Continuing Change

A lot has changed in the three years since Kyle McSlarrow took over as president and CEO of the National Cable & Telecommunications Association.

As the cable industry’s primary public-policy advocate in Washington, D.C., he represents its interests to Congress, the Federal Communications Commission and the White House. His overarching goal is to ensure that regulatory frameworks support innovation and growth for the industry.

With cable companies now in the phone and high-speed Internet business and giving telephone companies a run for their money, Mr. McSlarrow has his work cut out for him.

On the eve of the NCTA’s 57th annual convention and expo in New Orleans, he took time out to discuss some of the industry’s pressing issues with TelevisionWeek correspondent Hillary Atkin.

TelevisionWeek: You came to NCTA from the U.S. Department of Energy. How have you adjusted to your new position, and what changes have you seen since you took over the organization in 2005?
Kyle McSlarrow: Well, I’m not sure what I expected in this job, but we were off and running right from day one. I will say this: I love the industry. It’s been a blast. And I think partly the reason is because things change so fast in this industry, and one of the things that attracted me to the industry was that it just seemed like it was right on the cutting edge. I think that has been borne out by events. In 2005, the industry was just about to launch in a major way the phone service and, after years and years of talking about it, was starting to dip its toe on the programming side into real quality high-definition content. Now you can look back three years later and see that all those things that people were talking about are real. I mean phone’s taking off, we’ve got over 15 million customers for digital phone service on the operators’ side, practically every network you can think of has either launched an HD channel or is working on it right now. The operators are aggressively adding HD content to their service line of offerings, and all of the interactivity that we talked about over the last couple of years is also becoming a real, real thing. So from my perspective, in just three years in this industry, I’ve actually seen the cycle from promise to reality. And that’s pretty cool.

TVWeek: NCTA has launched a targeted ad campaign geared toward opinion makers that draws attention to some of these business lines that you’ve mentioned that are important in the future, like cable’s digital phone service. What drove the organization to do that?
Mr. McSlarrow: I wanted to pick something that was a microcosm of what I think the industry is doing. I think it’s important for policymakers, who’ve got a million things to focus on, to understand that this is not your father’s cable industry. This is not just 30, 40 channels of video. This is a broadband platform allowing us to do many, many different things. And it’s a success story that I think actually has public-policy implications. I’ll bet if you polled most members of Congress about telecommunications and said, “What’s your No. 1 priority?,” most of them would say, “deployment of broadband.” Well, which industry has actually put broadband in front of 92% of American households? The cable industry. I don’t think most of them actually know that. So I thought it was important that they appreciate that. Now there’s still some segments of the population, whether it’s low-income or rural communities, that don’t have service, and I think we’re very much about trying to figure out how to focus public policymakers on getting service to those areas.

TVWeek: What are some of the other key messages that are important to the industry that you are trying to communicate to policymakers in Washington?
Mr. McSlarrow: I think trying to describe how important it is that a regulatory framework provide incentives and support investment and innovation. There are always going to be some areas where, if there’s a market failure or the market just can’t step up and fill a gap, then you’re going to need a governmental role. But in most cases, if a regulatory framework supports continued investment and innovation, you may not necessarily know which direction it’s going to go, but it’s likely to go in really new and exciting and dynamic ways. And I think we are a poster child for that. Take, for example, the ’96 Telecommunications Act. It probably had as its central focus the creation of a competitive phone industry to take on the incumbent Bells. But it didn’t work out exactly like everybody expected. I mean, it actually created an industry. But another piece of that bill was the piece that deregulated cable. And while no one actually perceived it, that deregulation allowed us to invest in a two-way plant that then allowed the more far-sighted entrepreneurs in the industry to figure out, “Hey, we can actually offer phone [service].” So we ended up getting a competitive phone industry, but just not the way Congress actually originally intended, but by deregulation they promoted our ability to invest and then innovate.

TVWeek: How is the run-up to the digital transition next February progressing?
Mr. McSlarrow: I think it is mostly going well. That is to say, I think all the stakeholders, the FCC, the NTIA, which is the agency responsible for the coupon program, and Congress are working pretty well together. There’s a lot of activity, a lot of coordination—we and the broadcasters have been doing town hall meetings together. It is obviously more than just cable and broadcast, it involves satellite as well, but we are trying to make sure that the transition is something consumers are aware of and as seamless as possible. We have really progressed in terms of the average consumer out there being aware that a transition is coming. We’re not to the point we need to be at, though. But I do still worry, and I think everybody does, that there are consumers, households, communities, that just might fall through the cracks and either not understanding that the transition is coming or what tools are available to them, so I just don’t think we can be complacent about this. Representing the cable industry, we want to be part of the general public-service campaign, but we also have a responsibility to make sure that our customer service reps are trained to answer the kinds of questions they’re already getting from customers and to make sure that if someone calling from that cable household gets the right information and appreciates that for any of their television sets that are cable, they’re going to be fine. Because on the one hand we want to address those communities where people might need to take action. On the other hand, we don’t want people who don’t have to take action to get worried or to do things that are completely unnecessary.

TVWeek: How does the current competitive landscape look for cable?
Mr. McSlarrow: I’d say it’s pretty intense across the board. Over the last 10 years we’ve gotten to the point where one in three multichannel video households takes a satellite service. And, over the last couple of years, with the entry of the telephone companies, Verizon’s got over a million subs today. So on the video side there’s been red-hot competition over the last decade and it’s only becoming more so. On high-speed Internet, we’ve had over the last five years very intense competition between us and the telephone companies, and now you’ve got a lot of spectrum that’s been sold off that holds the promise of a significant and meaningful wireless broadband play, so there’s a new entrant there. On the phone side, we’re the new entrant. Telephone companies still have 87% of the phone access lines in America, but we’re obviously giving them a run for their money there. So, in every service for an operator, it’s incredibly competitive, and I think the same has always been true on the program network side. There’s real intense competition for carriage and a lot of investment going into increasingly quality programming. I think competition defines this entire marketplace.

TVWeek: What do you see as the biggest challenges for the industry right now?
Mr. McSlarrow: I think the digital transition is a challenge, but there’s an opportunity there, too. We have to be better executing our business plans, better at customer service, continue the relentless drive toward providing more high-definition video and increasingly more interactive products. It’s a much more complicated business for both operators and programmers in a world where the service line you’re providing, and the kind of innovation that each of those service lines can produce, is not just one-product video, it’s many different things. And then when you throw into it broadband, it’s pretty complicated. Where you touch the consumer is almost always the biggest challenge. There are just not that many industries or services who touch consumers almost literally 24-7, so you’ve got to almost be perfect, which is kind of hard to do. On the public-policy side, issues like net neutrality are the biggest challenges. There’s just been this perennial debate, really for decades, over whether or not a network that provides services into the home should be treated and regulated like a common carrier or ought to be—as we have been to date—regulated with a light touch. I think we can continue to make the case that that’s been good for consumers, but it’s a real debate today and it’s not going away.

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